BRRRR LOANS – whether it be a Bridge Loan or 30 Year No Doc Rental Loan – are non-consumer, asset based loans. Both types are designed for entity vesting and neither reports to personal credit; two features that conventional loans cannot offer. Qualifying for a BRRRR LOANs is simply a matter of meeting the minimum credit score, credit history, and liquidity requirements. Since we do not require tax returns, personal income documentation, or employment verification, we can qualify an applicant in less than 10 minutes. Pre-approval for a conventional loan, by contrast, takes numerous days or even weeks to receive.
As an asset based lender, the goal of our underwriting process is to verify the project details provided to us at the time of application via third party reports (e.g., appraisal) and a short list of supporting application documents (e.g., purchase contract, lease(s)). Once the credit profile of the guarantor(s) and property value of the collateral is confirmed, the Borrower can close within days – and sometimes hours – of clearing our needs list. To scale our business, we need you to scale yours; and we need you to do it with a BRRRRLOAN every step of the way. By design, the concept a BRRRRLOAN renders that of an exposure limit obsolete. Whereas conventional lenders are collectively limited to simultaneously financing 10 investment properties for a given borrower (see Fannie Mae Rule B2-2-03), we can lend an unlimited amount of capital across an unlimited number of loans to any one borrower.
Qualifying for a conventional loan is contingent upon the Debt-To-Income (DTI) of each applicant, as well as the credit and financial profile of each prospective guarantor. To determine whether an applicant qualifies, every qualified mortgage lender requires the taking of a tedious application (Form 1003) and subsequent verification of the information provided. In effect, pre-approval is subject to the Lender’s receipt and review of three months of paystubs, asset statements, the past three (3) years of tax returns, as well as leases, mortgage statements, and insurance declarations for all properties listed on the applicant’s Schedule E. For an experienced real estate investor with a long REO Schedule, using up one of the ten conventional loans (s)he is allotted at any one time on a 1-4 unit is highly inefficient.
With respect to the role that one’s personal Debt-To-Income (DTI) plays in qualifying for a BRRRRLOAN, the answer is simple: none. As a provider of business purpose, commercial loans backed by income producing real estate, our a priori concern is the collateral’s ability to carry the debt it secures. An applicant’s DTI, however, provides us with little to no insight into whether a specific property is more likely than not to cover its operating expense, nor the circumstances under which it is likely to do so. Without adding depreciation back into the adjusted gross income of a savvy real estate investor – the default practice amongst conventional mortgage underwriters – the DTI metric paints a highly misleading image of an applicant’s ability to repay. To avoid confusing the matter, our philosophy is to disregard the metric altogether.
